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tv   Bloomberg West  Bloomberg  July 16, 2014 6:00pm-7:01pm EDT

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in san from pier three francisco, welcome to "bloomberg west" where we cover innovation and future of business. ahead on "bloomberg west," more on my time warner reject it the initial takeover offer of more than $75 billion. time warner ceo expressed concerns about fox's structure, who would run the company, and the future of cnn that would have to be sold. cnn could fetch as much as $8 billion on the market. ebay seeing a rise even though
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ceo john donahoe called the corridor "challenging." they showedow e-commerce search results weighing on the business, but the paypal unit showing solid growth. pay 450s agreed to million dollars to settle allegations that it conspired to fix e-book prices. the trial between them and 33 attorney general's was going to start this month. tole just paired with ibm improve enterprise business. to our lead story of the day, rupert murdoch looking for a new piece to his media empire and he's hoping time warner is the perfect fit. the warner has rejected initial bid and murdoch is said to be willing to pay more to get cnn, turner,hbo, and more. it was first brought to the
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attention by murdoch's deputy over lunch last month in new york. a numberncerned about of factors including succession plans, the fox share structure, and the future of cnn. i want to bring in senior west coast correspondent jon erlichman with us from l.a.. thise been reporting on all day long. what is the latest on what we know now? look at the overall ansoning of the deal, ambitious rupert murdoch is thinking about the future and a word where you have pay tv players with more muscle. right now, you have two major deals trying to get a thumbs up in washington, comcast and time warner cable then at&t and directv. about raised questions the type of leverage for all the players in the world of content whether it is fox, disney, or
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viacom down the road. the logic that rupert murdoch has been pushing ahead and something like this to get his hands on hbo and essentially more sports rights and more international cable access, nothing has changed there. obviously the lack of explanation from time warner on their thinking behind this deal initially has resulted in more questions being asked. i think at the end of the day you will still look at a situation where time warner is going to have to find someone else with an interest and offer on the table to convince shareholders that will potentially fox is offering is not good enough. >> even if cnn is not part of the deal, would these companies be a perfect fit? the news networks have been bitter rivals. an important point. culture is everything. in the case of fox, for example, you're talking about a business that still has an
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entrepreneurial spirit he cousin who is leading -- entrepreneurial spirit because of who is leading it. this can sometimes lead beyond the newsroom. there was i thought that early on in the process as people started hearing buzz about the potential of a deal like this, some time warner executives laughing it off in part because of the bitter rivalry. does this story simply end up with cnn very quickly and quietly being sold them the rest of time warner falling into the fox empire? is it that simple? we will only know in time. erlichman, senior west coast correspondent from l.a., thank you so much. i want to bring in jeff mccracken who covers global him m&a in neil sequoia, previously a managing director at time warner investments where he worked closely with various
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operating groups including aol, hbo, and warner bros.. gentlemen, thank you both for joining us. what are you think having worked there for many years in high-level positions? think? do you >> i think this makes a lot of sense for fox. what jeff bewkes has done is increase for time warner. for fox, it makes sense. they are pushing back on closing a deal at this point. reporting on this from the very beginning. give us some of the details. >> it starts with a friendly lunch in new york in early june, if you will. chase dropped the idea on him of a big merger and bewkes raises three biggest years -- big
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issues. your contract is up in 18 months. my shareholders will have a concern about the structure in place at fox. heard, with the future for cnn? they don't ever get any feedback from the ceo. finally, they send a letter on june 24 from rupert murdoch addressing those concerns. we will sell off cnn right up front. yourd, we don't think shareholders world care about voting structure. we will extend his contract to the end of 2016 if need be. they addressed the issues but feedback until they were told in a terse two second email that they were not interested. >> let's talk about the future of cnn. a lot of attentional interested buyers -- google, yahoo!, disney
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/abc. neil, which of those do you think seem more likely or realistic if this deal goes through? a valuable fox values it at about $8 billion, roughly 10% of the value of the whole entity. are hbo,crown jewels turner. i think disney is a natural buyer for many reasons. they own some of the most important cable properties like espn that exist today. propertieshat set of gives them more leverage for carriage agreements with mso's and cable operators. it's interesting to talk about cable lan yahoo! -- cable and yahoo! ruupert murdoch
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othershis to send off like google and amazon? >> he feels like the timing is right. they are passed a law of the phone hacking scandals that have been plaguing news corp. and the murdoch family. there is the antitrust situation directv and and comcast and time warner. he's seizing on a situation where he thinks it's the right time. it's the right time to borrow a lot of money because interest rates are so low. a lot has come together to make a deal make a lot of sense for murdoch. >> a lot of these megamergers don't have a great track record. aol time warner going back a decade. we mention some of the cultural differences, the rivalry between fox news and cnn. beyou think there would
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cultural differences between time warner and 21st century fox? could those be surmounted? warner duringme that merger and that cultural fit was very fickle to overcome so i understand the issues that could take laissez-faire merger that cultural fit was very difficult overcome so i understand issues that could take place between a merger. that is less of an issue. at a larger company, fox studios and warner bros., very different cultures. you have different properties inside of the cable networks that would be difficult cultures. i think it's a really big question. a merger here would have to be done carefully and for a very significant time keeping the company separate is the likely outcome. >> what about the relationship between bewkes and murdoch? will executives stick around?
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would bewkes stick around? >> after they did not get a letter, rupert sent a letter back saying he would want him to stay on going forward but it was very clear that bewkes would not run the company. they would want him around whether it was an advisory role or on the board. clearly this is a murdoch and or chase carey operation to be run going forward. he would not be the ceo. neil, having worked inside this industry, how do you think a merger like this would reshape the industry for better or worse? we know comcast is trying to buy time warner cable and at&t trying to buy directv. moreve not seen a focus of players you. >> the distribution consolidation is on the way. that's already started and will continue, which i think is very
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bad for consumers and very good for those companies. bad for consumers in that it stifles innovation. there is pricing issues in terms of internet activity -- internet connectivity. there has been some consolidation but not to the same level. i think it's going to be necessary for it to happen. billion company with significant leverage given espn and other companies. few warner as recently as a years ago was trading in the $20 billion range. it will be a necessity to consolidate over time. it makes sense from a business standpoint. i'm just not sure it makes sense from a consumer standpoint. >> how do you think this will play out?
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21st century fox and they're willing to pay more. comcast and other potential suitors like at&t are busy dealing with other potential acquisitions. how do you expect this to go from here? >> the ball is really of a court of the shareholders now. the largest shareholders, roughly 70% of the big holders, are also holders in fox and that is where the game moves now. the advisors in fox itself will be prevailing upon the large shareholders saying to them that only you can get time warner to move here. rupert is willing to up his offer but that is contingent. it is contingent upon being able to engage with time warner and see if there is more synergy and cost cutting there. they're estimating at least $1 billion. privately they think it could be 1.5 billion that they can get access to the books. if they start to weigh in and lean on time warner, you will
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see something happen. lead jeffrg m&a ,ccracken and neil sequeira thank you both. just how genetic is the change in ebay's business? these surprising results from the just-released earnings report next. ♪
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>> welcome back to "bloomberg west." i'm emily chang. ebay announced second quarter after the bell reporting impressive gains from its paypal division in big growth in mobile. there are problems traditional -- in the traditional auction business. they are having a tough time competing with amazon. editor-at-large cory johnson is here with me in the studio. amazon sales grew three times as much. had someay acquisitions that should have added to sales. i was thinking of the social numbers and it really represents
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a lot of the trends we were reporting back there in the winter when it was so cold. billion in revenue, 13% rise, very impressive. million net income meaning percentages have gone up. one of the interesting things in this quarterly report is ebay's discussion of cyber security, so expensive and a quarter that sales and marketing costs have been higher in the past. >> they did have the hack attack. >> that raised cost in the quarter and the suggestion is that will not happen next quarter. >> paypal did well and that's not really a surprise. it always does well which is why there's a discussion about why they should be together or separate. john donahoe is running paypal and ebay because he lost his top guy who recently left for facebook. growth,reported a 9.8% accelerating growth and you can
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see what he did. he really turned the business around. it was only 18% growth and that was slow in coming down. reignited that growth. >> 19.8% growth. growth rate is increasing and when you compare that to the marketplace when you're seeing single-digit growth like 8% in the quarter they reported just today, a substantial difference. the marketplace growing slowly and the paypal business growing more quickly. we can look at figures on when paypal may be bigger than the market business. >> we will be watching to see when you get someone else to be his second in command. john donahoe, a lot of work to do. cory johnson, our editor at large, thank you. is it finally rebounding from its slump? intel thinks so. we're streaming on your phone, tablet,, apple tv,
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and amazon fire tv. ♪
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>> welcome back to "bloomberg west." i'm emily chang. intel saying demand is starting to recover among consumers who are buying laptops again. cory johnson is in the newsroom with more. is the worst really over? what about tablets? it's really interesting. as you mentioned, strong results . intel chief ceo and executive vice resident stacy smith joins me now from intel headquarters. the results were still really strong. the guidance even stronger. it seems like a lot of that was
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driven by corporate demand. yeah, i think at the highest level ucr strategy playing out. you saw some momentum in the pc , particularlyss in business. you saw a starting to gain share in tablets and we are well on our way to 40 million. nice growth in internet and the data center that serves all of the other markets. all of that played into driving really great results for q2. theveryone who wrote headline the pc was dead wrote the headline on a pc. what is corporate demand right now? >> what we see is a lot of computers out there that are over four years old. many think about the evolution of the computer, they are thinner, lighter, spectacular performance in graphics, touch isbled, so what we're seeing
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really the start of a refresh of people buying new devices because of the capabilities those devices bring. >> you seem to have a better crystal ball than most companies. i wonder when you look out into the future, when do you think we will finally get consumers to put down their phones and tablets and pick up computers with intel chips in them? i don't think they put down their phones and tablets. what we see as consumers have multiple devices. and they walk into a retail outlet to buy their next device, what will they buy? what we are aiming for is to make my computer so good and so compelling that they will upgrade their pc that could be significantly older than their tablet and it's the things i experience, -- user touch enabled, modern os. all of that plays in. pc's the upgrade cycle for
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longer now than it had been with the introduction and adoption of phones and tablets? >> you know, i think we have seen even over the last five plus years and extending out of the life of computers. i think the way people use computers has changed somewhat, some people have multiple devices now. all-in-one or big your home media server and home control system. you might have multiple laptops. what we see is those don't tend to get replaced. you tend to by other devices for new usage models. -- you tend to buy other devices. i remember how tremendous it was when the vice of the pc -- price dropped below $1,000. it's driving the elasticity of demand.
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>> is this just about utilization or is there more to it than that? highest level, it is at what are manufacturing advantage allows us to do in segments of the market where performance matters, we can bring in architectures that have so much performance that we can actually drive a really rich mix by selling really high-performance devices to our consumers because they get a return on investment with going with the high-end of the roadmap. we can target are greenwich to make sure we have the lowest possible cost and i think you really saw that playing out in the second quarter. m-based producto that enables lower-priced wines. because it has a lower cost, we can do it in a way to generate a really healthy gross margin for the company. it really comes down to manufacturing advantage helped
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by the fact that the factories are running nice and full. >> intel cfo stacy smith, thank you very much. >> coming up on "bloomberg west revolvingory issues around fox and time warner next. ♪
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>> you are watching "bloomberg west" where a focus on technology in the future of business. i'm emily chang. top story of the day, time warner rejecting a takeover bid from rupert murdoch's 21st century fox including fox news, and he'ss, fsn, chairman of news corp. including his publishing assets like harpercollins and "the wall street journal." what is is current reputation in and out of the company and in the broader media business? senior west coast correspondent jon erlichman is back with us and erik schatzker said it's not
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about vanity or winning. it's about reggie. what is it? a thinking and being visionary. your profile a lot of entrepreneurs and people who were thinking frequently about the future and trying to run their businesses in a similar fashion. has been doing this for decades. when it comes to being entrepreneurial, there are defense assets to this. -- there are different fassett's. when they launched fox broadcasting in the first place or when it comes to putting people in positions of power, a lot of people who have worked for rupert murdoch over the years talk about a big company where there is a bit of a start up field because of murdoch, his interest in moving quickly. in this particular case, we talk a lot about rupert murdoch, we have to talk about his right hand man chase carey who knows a
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lot about the value of global tv assets these days and is playing an important role in the of jamesg role murdoch, mentored his sons, so focused on the television assets. i think that collection of thinking on rupert murdoch's of fear, hence his twitter account, not a lot of corporate america ceos who are just willing to say what they think on twitter. of his reputation, does rupert murdoch have a reputation of being shareholder friendly? this dealeling like may ultimately be a shareholder decided deal. we are already talking about the fact that you have similar both foxer bases at and time warner. the group of shareholders that might have to be convinced on whether or not this is a good path are similar individuals. i think if you look at what happened with the mess that was the phone hacking scandal and
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the split up of the two different business seen as a shareholder friendly thing and moves like stock buybacks, there is a view right now that fox is a well-positioned business that has strategically made investments over the years led by murdoch that maybe did not make sense right away but have andthem up for profit revenue generation going forward. they are in a position to have the benefit of the doubt him shareholders and i'm speaking to at least two today who are encouraged by this development and are still waiting to see what happens next. >> i believe a lot of the shareholders who are invested in 21st century fox are invested in time warner, right? >> it is fascinating to see jeff bewkes talk about the fact that there was no interest in the board level of engaging with fox at all right now. it did feel like that was a little bit of positioning
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because you have so many other potential suitors who are tied with time warner cable being swallowed up by comcast and at&t not being able to do anything because they are acquiring directv. to make a comment like that is a very different tone than to say we are not interested in doing the deal at this price because we are worth more. that is certainly the way things played out with time warner cable. the shareholders of time warner are getting something to help fox and maybe they will be more willing to do a deal like this and it feels like things are unfolding. jon erlichman, senior west coast correspondent, thank you so much. one of the biggest issues with bidrt murdoch's $75 billion to buy time warner is the regulatory issue. editor-at-large cory johnson is here with more.
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other than cnn, are there issues? it's about concentration of business. a lot of the rules about cross media ownership have changed. there was a time when you could not have a broadcaster opening the newspaper in the same town. those have changed not the least is rupert murdoch have changed that. >> what are the issues digging deeper into this that could prevent them from winning approval? a former fcc commissioner joins us now from washington, d.c. johnsond what cory said. are there other issues beyond the cnn that these half to worry about? if the deal goes forward there will be a lot of issues outside of cnn. a lot will depend on how the antitrust agencies define the relevant markets. from hollywood studios to the other assets that
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time warner and fox have both in the united states and frankly around the world. us about thelk to framework in which the fcc will look at this. at thiscc will look candidly. i don't think they have any legal reason to look at it at all but this will not stop them. these are two entities heavily so theyd by the fcc will take a good, long hard look at it. they will do what is called the public interest standard which is an amorphous term and it will be whatever the fcc decides to do with it. they will look very heavily at the cable programming and they will probably also look a lot at the bargaining power and negotiations between cable programmers and the distributors which is, really, driving a lot of the recent mergers, certainly
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comcast, time warner, at&t, directv, it's about seeing who can have a lot of borrowing power in negotiations between distribution and content origination. >> the fcc is already currently cable, at time warner directv. i want to bring in visiting professor and author of "captive audience" joining us from new york. susan, how does this deal strike you from a regulatory perspective aside from the issue of cnn which would be presumably sold anyway? >> harold is right. this is driven by the distribution side. hollywood is cared seeing the comcast will likely be able to merge with time warner cable. they need a a lot of heft on their side of the table to negotiate. >> susan, you think this is driven by hollywood and not cable? >> this is driven by the
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programming industry making sure they can reach people who love their programming without having to pay whatever comcast-time warner cable wants them to pay in terms of tribute. they want to be able to control their own destiny. if hbo can never go over the top by themselves, they can need to be sure they can reach subscribers and that can only happen if they have enough power to make that true. thearold, why do you think fcc should not be looking at this? it's one of my personal views that the fcc does not have the authority to review mergers. the public is served by two thetrust agencies, department of justice and the federal trade commission. you have hard-working civil servants at these agencies who do a wonderful job at reviewing mergers. to revieweed the fcc it as well. >> susan, how do you see this playing out? toe warner does not want
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consider when other potential bidders are tied up dealing with other acquisitions and potentially verizon. over the next few months, how does this play out? >> bewkes has to be near this. warner cableme goes through, they will be the only choice for high-speed data distribution to those households. , if he wants to make sure hbo will get there, he has to be worried about being acquired by comcast. he needs a partner to help him control his own destiny. is?knows who it there are only a few players left on the board with whom he can deal. susan, why should or should not the fcc be involved here? >> when harold was a commissioner, he voted to approve all of the megamergers that had gone through during his time. he has presided over enormous
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consolidation in the industry. the fcc broad public interest mandate allows to look out for the future of american communications and that is extraordinarily important. they see how all of these pieces fit together and it is very relevant for them to get a chance to look at this deal. do you see this triggering a continuation of a spate of megamergers? >> it's hard to predict the future. it's hard to know whether there are future large mergers down the road. thank you, to susan, noting my tenure on the commission, but i dissented from every condition on every merger on the grounds i thought the fcc had no authority to actually review the mergers at large. i think the fcc has the authority to review the transfer of licenses, just as it does for the hundreds of thousands of
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licensed transfers that happened routinely every year. >> susan, what i wonder from you is what are the issues the fcc specifically would address that the ftc and justice department does not? >> they can think of future over the top video. they're looking at interconnection between the netflix networks, the wires that use and having expertise in that issue will help them evaluate whether time warner in the future, as a programming company, will have the freedom to reach subscribers. it gets to look at the entire ecosystem of information and explore the deal through that lens. >> a lot of unknowns here, none the least how to give traders will deal with it. susan crawford, harvard visiting professor, and harold former fccroth,
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commissioner. thank you both. still ahead, apple and ibm have put aside their differences to form a new partnership. that and more when "bloomberg west" returns. ♪
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>> welcome back to "bloomberg west." i'm emily chang. apple and ibm have been rivals since the dawn of the computing era but they have put their differences aside in the interest of growing both of their businesses. apple and ibm are teaming up to develop apps for the iphone and ipad tailored to work with data analytics and cloud services. cory johnson and i spoke with giga ohm founder and i started by asking just how big a deal this partnership really is. first, it's how the tables have turned. ibm used to be the company who set the agenda for technology and now apple and google do that. that is very clear sign that we
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are seeing a much weaker ibm as a tech company. read a lot of stories about this being a great move for apple. defensive move because android is a lot more open and flexible from an enterprise standpoint. from that standpoint, this is a good combination for them. i tweeted this yesterday and i called it " ibm as just another channel partner" for them. instead of selling to just target and walmart, they are using ibm to go to enterprise. is athat standpoint, it net positive but it is still a defensive move. it's to take away from the fact that android is more flexible and more adaptable for enterprise. >> you wonder if ibm will strike the same deal with google next.
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will they be offering android devices? >> i wonder if there is part of the deal that would prevent that? >> exactly. there was no indication. the fortune 500 companies adopted and sold an additional couple thousand ipads and iphones, if half the fortune 500 added it up a would really speak to how big apple is. i think it's a big deal because what it could mean is the holdout, the blackberry users, those that refuse to embrace any kind of apple product are no longer the holdouts. the notion that ibm and apple notion is a 30-year-old that is not as important right now. it really does signify something really important, the last boundaries of apple reach have fallen. >> i think the shift to mobile computing has created a whole new class of leaders, ibm, google, even samsung.
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they are the companies that are looking forward and becoming the people who set the agenda for enterprise computing. you see ibm, dell, hp. companies that have fallen behind. their star is on the wane, so to speak. i think this is positive for apple. let's just face it right now. ipad is the better tablet in the market. >> but ipad sales are slowing down. >> the new surface device is impressive that does a lot of things that a laptop would have been used for in the past. >> right. i'm really impressed by tim cook's ability to strike up vital partnerships and do out-of-the-box things to make sure that the revenue stream heaps growing. i think it's very easy to forget that this is a company that is still trying to become big.
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-- a big >> apple is still trying to become big? it's the biggest in the world. >> it needs to be bigger. the market share it has is not that great. they need to make more money. they need to justify their bigness, i guess. >> we saw them strike a deal and jimts with dr. dre my iovine. is this a new apple that is more cooperative than steve jobs? newhis is definitely a apple. john gruber put it well. this is tim cook's apple now. on can see the clear imprint the company already. i think this is more execution oriented about the idea of open, mores, more willing to be adaptive to the new world reality.
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>> is it visionary? everyone looks to apple for new, great product. >> it smart to get the biggest reseller in the world to sell your product. it would be a very big deal for these guys. it's a big deal for them to be out there hawking this deal. ibm needs this badly. ibm needs to have the best solutions available. when they were not selling ipads, i'm sure they would get them somewhere else. withas seen nine quarters no sales growth at all because they have been boosting earnings per share by buying back shares as opposed earning more money and performing better. ibm certainly needs this deal. >> what apple does that is visionary does not -- is not seen by the public. everything they do under the hood, the phones, the tablets, the devices, the material sciences corporation that they do, we don't see it.
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we just use it. that's the new apple. we have to get used to it. you might think about a bigger apple iphone as just an iphone, but what happens underneath the screen is something that not a lot of other people do. partner omtures malik and editor-at-large cory johnson. is poppingw logo some controversy. was the new shape a mistake? we discuss it next on "bloomberg west." ♪
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>> welcome back to "bloomberg west." i'm emily. it's time now for the bwest byte where we focus on one number
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that tells a whole lot. jon erlichman, our senior west coast correspondent nla, but cory johnson has the bite for today. -- in l.a., but cory has the byte today. >> 1. introduced a new logo with an interesting icon that looks like, well -- >> you say it. >> i was a looks like a bent paperclip. it has a feminine quality. >> a rounded triangle. >> it has a lovely, attractive, feminine quality. [laughter] >> so many people have been tweeting at me since the early show. jon, your thoughts? >> i'm glad you brought up the body part because there has been a lot of discussion around that. it's kind of like a circle inside a triangle. >> that's a good way to describe it. [laughter] on sirius,berg radio
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the host asked as well. we needed to describe it for our radio listeners. >> we did describe it. listeners get the point. airbnb worked with a u.k.-based as i'm firm -- design firm. the point out that it looks exactly like automation anywhere's logo, a software company in san jose. >> more curves to the airbnb one. >> i like the old logo. maybe that means i'm not willing to change. why? >> you are willing to change but it's a different topic. let's talk about this logo. this is more entertaining but i won't say it. the body part it resembles. jon might. you can say it in canada, right? [laughter] >> eh?
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i think they got their money's worth. >> thanks, guys. ♪
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>> welcome to money clip, where we tie together the best stories and interviews. i'm adam johnson. big day for technology. the future of driverless cars at google. and apple and ibm coming together. around the world, gaza and israel trading attacks for a ninth day. health-carergest company takes a page from the health care playbook. johnson &


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